Municipalities work to BRIDGE the URBAN RETAIL gap

CITIES ARE TAKING AN ACTIVE ROLE IN LINKING TOGETHER MIXED-USE DEVELOPERS, SITE-SEEKING RETAILERS AND UNDERDEVELOPED URBAN AREAS.

Cities old and new, large and small, east and west are working diligently to bring in the appropriate retailers to serve residents as well as those who work in the immediate area.

Many are successfully meeting the challenges posed by large regional malls where parking is plentiful and free, the climate is controlled, housing is nearby and big-name stores cluster like teens at a high school event.

But municipalities — and shoppers — are discovering there's something special about cities. They offer a sense of place. They often have rich, distinct histories and beautiful rivers. They have it all, from workplaces to entertainment centers to dwellings.

Older cities are learning how to make their environs clean, safe and attractive, and how to publicize those facts. Newer urban areas are learning to define themselves and their goals.

Once the demographics indicate the market is ripe, and the conditions are pleasing, and once a major national retailer is willing to commit, the scene is set.

Jim Stokas, a vice president with Trammell Crow Co. in Southfield, Mich., makes what sounds like a radical suggestion to municipalities. "If you have to give space away in order to attract a key retailer, it would be worth it," he says. "Would retailers who follow be upset about that? No, as long as they can reach their sales goals, they don't care. The first retailer is the one taking the biggest risk."

Stokas says he has not observed cities offering any kind of financial incentives as a way to attract retail. "Cities don't have that much to give," he says.

"It would help if they made it easier for developers to get approvals," Stokas adds.

There are basic requirements and there are intangibles that retailers must consider, says Michael Beyard, senior resident fellow with the Urban Land Institute in Washington, D.C.

"As a rule, retailers have limited resources and limited time, so they tend to pick the low-hanging fruit," Beyard says. Locations with the right demographics, population, growth outlook and household income potentials are the first picks.

"The quality of the developer, the developer's track record and existing anchors and competitors affect decisions as well," he says.

Beyard says customers want more than a place to consume. They are seeking someplace they want to go. And retailers, he says, like to distinguish themselves and create an image. This can be done by occupying interesting spaces, including beautiful, existing, older downtown buildings.

"Retail needs diversity, surprise," Beyard says.

Nevertheless, the area must meet certain basic demographic requirements and must be seen as a place that will meet the retailer's sales goal.

If an area does not, he says, "many department stores wouldn't come if you gave them the space."

SPACE RESTRICTIONS

Last summer a team from the Urban Land Institute paid a visit to San Jose, Calif. They weren't coming to soak in the sun or slip up to San Francisco to ride the famous trolleys.

The ULI reps spent their waking hours walking through parts of downtown San Jose, doing dozens of interviews and generally studying the composition of this city of close to 1 million people.

Their recommendations, the interest of Mayor Ron Gonzalez and proposals by the city's 33-member citizens downtown strategy task force already are having an impact.

"We've always had a strong office market," says Peggy Flynn, director of communications for San Jose Redevelopment. "In the last year, 1,700 new residential units were built. Improv and House of Blues have moved into downtown and serve as legitimate retail entertainment anchors."

The office market has been so successful here, though, that the task force supported a temporary ordinance restricting the use of ground floor space in designated areas to retail.

"The ground floor ordinance also keeps rents at levels attractive to retail," says Flynn. The temporary restriction may be extended past its current spring (2001) deadline and gain a permanent status.

Some 1.6 million sq. ft. of space in the downtown area has been designated for mixed-use development and redevelopment. The historic Montgomery Hotel is being renovated. There are plans for another historic structure to be turned into build-to-suit lofts atop a ground floor Italian restaurant and a sports bar.

"People are discovering San Jose has excellent places to live," Flynn says. "There now are condos and townhouses on the market for $300,000 to $400,000."

Ambitious new construction and renovation plans for the area extend to the onset of 2005.

River banks and wetlands

When Mary Mann drove into Red Bank, N.J., last year to interview for a position as executive director of the RiverCenter Special Improvement District (a BID), she knew almost immediately that she had to get the job. This town of 12,500 on the banks of the lovely Navesink River, with its late 19th-century Italianate storefronts along several streets, looked wonderful, even compared with the sophistication of downtown Philadelphia to which she was accustomed.

Red Bank continues to write its success story. Less than a decade ago it was an afterthought of a town. Today its 1.75 square miles are the destination of local consumers, weekend visitors and national and regional retailers. In the early 1990s, the vacancy rate for the shopping district stood at 35%. Today, retailers call Red Bank or RiverCenter to see if any space has opened up.

Parking is an ongoing problem, Mann says. As the area's popularity increases, so does the need for safe, convenient places to leave cars.

"The Borough is proposing a 570-car, four-level parking garage that should help alleviate a crushing need for additional parking," Mann says. Pending bonding approval, the structure will be erected on what is currently a parking lot. Mann said its design calls for a decorative brick façade that will complement surrounding buildings, plus 7,000 sq. ft. of retail space within the structure itself.

The New Jersey Transit has done its part to make travelers feel welcome here by adding lighting and improving pavement around the train station. There are plans to renovate the historic station house, Mann reports.

"Red Bank serves as the downtown for several communities in this area," she says. "While the Monmouth regional mall is just five miles away, we have both national retailers such as Restoration Hardware and Starbucks plus unique shops, from upscale boutiques to affordable variety stores.

During its rebuilding, Red Bank attracted retailers by providing matching grants to help pay for façade improvements. The grant money was the result of Special Improvement District assessments on area property taxes.

Anyone who has seen the award-winning HBO cable TV series The Sopranos feels like he or she has driven through parts of Essex County, N.J., including the state's largest city, Newark. Bridges, petroleum storage tanks, intersecting interstates, wetlands and lots of urban sprawl mark much of this area.

That sprawl includes the blight which accompanies aging communities, and Newark has had its fair share of that.

Two years ago the Newark Downtown District was launched with the intent of providing services "aimed at increasing the value of the commercial property base," while improving the overall quality of life in the downtown area. This Special Improvement District, under the interim care of Square Foot, a downtown and urban revitalization company, had an operating budget in 2000 of $1.3 million.

"Commercial properties in the SID area are assessed 5% on their commercial property taxes," says Newark Downtown District spokeswoman Hilary Michel. "Most of our budget comes from this assessment. There is some additional funding from the Newark Enterprise Zone."

A façades program in 2000 invited Newark businesses to submit proposals. There were grants in amounts of up to $33,000, and $5,000 available to help pay for facelifts. Winners were asked to match or exceed the grant monies.

"We had three businesses win the larger amounts and nine qualified for the smaller grants," Michel says. Their designs were completed earlier this year, and work — usually new lighting and signs, streetscaping such as benches and plantings, exterior painting and even tuck-pointing — begins this spring.

Some of Newark Downtown's successful retail promotions include the Twelve Days of Music concert series in December, attractive shopping bags bearing the Newark Downtown name and lots of coupons and shopping information.

"In the summer of 1999, we helped retailers put together their first sidewalk sale in two decades," says Michel. "We did another last summer, and it was so successful they begged us to do a back-to-school sidewalk sale, which we combined with the annual September Festival of People."

Newark Downtown assists retailers any way it can, she adds. "We can bring in window dressers to help smaller mom-and-pop businesses, we handle posters, pens and other give-aways."

Many hands make light work

Philadelphia's Center City District credits the impressive redevelopment of the birthplace of American independence to the involvement of many organizations.

"It has been a real joint effort," says Michelle Shannon, Center City director of marketing. "Things were happening concurrently."

In the last 10 years, the 100 square blocks which Center City serves has blossomed. Walnut Street is, more than ever, a restaurant row with establishments ranging from a five-star dining destination to informal spots to relax and nosh. National retailers have flagship stores in the area. The Pennsylvania Convention Center is a catalyst. Hospitality and tourism are growing. The Avenue of the Arts brings people in from the suburbs and keeps downtown residents from retreating to their apartments at day's end. "When we [Center City] were founded 10 years ago, our mission was to make our area clean and safe," Shannon says. "You can't throw a party if the house isn't clean."

This campaign was joined by a program in which businesses might win matching monies to improve their façades. "Bonds were issued and revenues helped pay for façades and for streetscaping," Shannon says. Some $26 million went into streetscaping in 1996 and 1997 that included 1,000 new pedestrian lights, new trees and sidewalk repairs. The practical result was a more walkable city and increased pedestrian traffic.

In 1992, Center City launched "Make It a Night," a retail promotion that encouraged downtown workers and residents to enjoy late shopping and dining.

"Wednesday was a traditional night in which stores stayed open," Shannon says. "We promoted it and began offering things like free metered parking." It caught on so well that it now has a life of its own and doesn't require special promotions.

Ad campaigns for retail continue to have an impact, she says. "We stay very involved in retail by providing comparative data, consulting in crime prevention and continually reminding people of what downtown has to offer," says Shannon.

Center City is so intent on improving the appearance of downtown buildings and streets that it published design standards and suggestions for façade improvements complete with "do" and "don't" photos, plus suggestions on improved lighting, signs, entrances, awnings, security grilles and enhancements of building ornamentation.

California old and new

The Southern California community of Santee (pop. 58,000) was incorporated just two decades ago, in 1980. In contrast, at the northern edge of metropolitan Los Angeles, the city of San Fernando is home to one of the 21 missions established centuries ago by Spanish settlers. Between the two, just off Interstate 10, is Rancho Cucamonga, a city of 125,000 which, like Santee, is fairly young. It was incorporated in 1977. Each municipality is distinct, but all share the need to attract and retain a mix of retail that best serves the population.

The City of Rancho Cucamonga Redevelopment Agency is justly proud of its nearly unique website. The Internet format allows real estate, development and retail representatives to zero in on each of the city's shopping centers. For example, someone looking to lease 30,000 to 35,000 sq. ft. can type in those numbers, get an immediate list of which centers may have such openings and then find the centers, with good descriptions of major tenants, on a map.

There are similar searches available for office and industrial space. "This search potential is very helpful to retailers," says Mitch Slagerman, senior redevelopment analyst. "Our site has extensive demographic information about neighborhoods within various ranges of Rancho Cucamonga. Retailers can find out if this is a suitable market for them by looking at ages and incomes of residents."

Slagerman says plans for a 147-acre regional shopping center, a joint effort between Forest City Development and the Rancho Cucamonga Redevelopment Agency, are in the entitlement process. Work on the center may begin in spring 2002.

Back in the 1980s, he says, financial incentives were available for large developments. This is no longer the case in California.

End of line provides beginning

Santee, about 20 minutes from San Diego and La Jolla, benefits from being at the end of the San Diego trolley line. Its Trolley Square project lies adjacent to the station and turnaround point for this distinctive form of public transportation. Trolley Square Center, on a 50-acre parcel of land northeast of the station, will add new shopping to the developing area.

Pamela White, of Santee's Department of Economic Development and Housing, credits a building-block approach to development for the successes of the last 15 years. While only incorporated in 1980, the city by 1982 already had a redevelopment plan. "Back in 1985 the city worked to develop a prime 14-acre site downtown for Price Club," says White. Santee, the property owner and Price Club forged a three-way deal.

Once Price Club was in place (today it's a Costco), Wal-Mart moved in. By 1989, White says, there was a viable power center in this northwest quadrant of the city's 700-acre core. Home Depot is a third anchor here at present.

A new street providing better access to the center and sales rebate transactions were among the incentives offered by Santee to the retailers.

Based on these building blocks, Santee was ready to facilitate development of the northeast quadrant with Trolley Square — "a lifestyle center," says White, with apparel stores, electronics outlets and restaurants. The developer, Phoenix-based Vestar, is acquiring land for the project from the city of Santee.

Trolley Square is slated to have 440,000 sq. ft., says David Larcher, executive vice president of Vestar. Projected anchors include Target, Bed, Bath & Beyond, Old Navy and TJ Maxx.

"We hope to begin construction by November of this year," Larcher says.

"Without a successful power center, we could not have attracted a developer who could bring in the best retailers," White says. "Developers look for shopping centers nearby, and they love being near transit."

More good news is an emerging office and technical park north of the power center and Trolley Square.

"Santee used to be a bedroom community," says White. "We are trying to create more local employment centers. The new office-tech park may serve as an engine for that kind of development."

Families in San Fernando have been driving 25-minute commutes to do their shopping. This city of 25,000 mostly middle-class residents was once a rail center. Incorporated in 1911, it is struggling in 2001 to become a regional shopping destination, says Sarah M. Withers, economic development manager.

"We lack a lot of retail," Withers says. There is no Wal-Mart in town, for example. The San Fernando City Council is acting as the local redevelopment agency. One of the incentives in its tool bag is the ability to make two-year loan/grants to businesses seeking a location here. If the business stays past the two years, the "loan" is forgiven. Withers says the council is offering Starbucks a $125,000 loan/grant on its new $400,000 drive-through in San Fernando — "the first drive-through in the San Fernando Valley."

The agency is funded through property taxes from new developments. Zellman Retail Partners is the exclusive developer of 12 acres in the downtown area, which is slated to include a 135,000 sq. ft. big box, plus ancillary retail.

"We're underserved in many areas," Withers says. "People are going 10 miles to Northridge to shop at Sears and Macy's.

HOW SANTEE ENCOURAGES RETAIL

The City of Santee, Calif., has worked vigorously to attract retail to its 706-acre, masterplanned Town Center area. Santee built what is now the Santee Plaza power center, with Costco, Wal-Mart and Home Depot, by developing deal points with retailers it wanted available to its 58,000 residents.

In 1990, the city's Community Development Commission (CDC) rebated quarterly to Wal-Mart 50% of the retail sales tax revenue generated by the Santee store, up to a maximum of $2.1 million. The CDC also contributed $1.2 million toward payment of city development impact fees.

The 440,000 sq. ft. Santee Trolley Square Project currently under way involves an agreement between the CDC and Phoenix-based developer Vestar Development Co. in which Vestar will develop the Santee Trolley Square on 50 acres it is purchasing for $4.1 million from the CDC.

Vestar will pay for a full plan check and other fees including building permit fees estimated at $2.5 million. The city and its CDC will waive $1.2 million in traffic drainage and traffic signal impact fees.

The developer will pay $1.3 million in traffic impact fees, with a deferral for 18 months after the final certificate of occupancy for center anchor and major tenants. The CDC will make a reimbursement/subsidy payment of $2.3 million to reflect financial assistance toward the project and public improvements. The city also will reimburse Vestar for off-site public improvements.

"Santee Trolley Square retail-entertainment shopping center will provide enjoyable, approachable public spaces with the strong retail-entertainment identity that reflects the desires and vision of the community," says Pamela White, Santee director of Economic Development and Housing.

BUSINESS FOR BLOOMFIELD

When New Jersey Transit adds the Midtown Direct to its train service out of Bloomfield, N.J., in a couple of years, this middle-class bedroom community of some 45,000 is likely to see the number of commuters using the train station more than double, to some 1,500 to 2,000 per work day.

That spells business opportunity for the home of Bloomfield College. "The area is suitable for mixed-use structures, including additional parking plus residential above office or retail space," says Marta Person, president of Square Foot, LLC, revitalization and development specialists with offices in Newark and Long Branch, N.J.

Requests for proposals from prospective developers are due the first of May.

"With household incomes averaging $48,000, 2,200 students and faculty at the college and many young families with children, there is a need for retail including athletic footwear, children's items, office and school supplies, computers and music and books," Person says.

NUMBERS & MARKETING

Shreveport's Director of Economic Development Arlena Acree doesn't try to mask her enthusiasm when it comes to new retail in this Louisiana city of 200,000. "Our first Target is slated to open in July," Acree says. "It will be a Super Target and part of a new super center at Youree Drive and 70th Street."

The city is hoping to attract developers for both a new mall and an outlet center, she said. What makes this city up in the northwestern corner of the state attractive are its numbers.

"Our economic information is good," Acree says. "Construction is up, retail sales are up, tourism is up and General Motors is expanding its truck plant here."

This also is the ninth largest gambling market in the country, she says. Its five casinos have spawned hotels and are attracting enthusiasts from nearby Texas.

Weingarten Realty Management Co. of Houston is developing the new Target-anchored strip center. The REIT has had its eye on this site for well over a decade, says Patty Bender, vice president, leasing. "We've been waiting to buy the property at this intersection for about 15 years," Bender says.

Weingarten has long had a foothold in Louisiana, frequently with grocery store-anchored strips. University Place, the new super strip, features a 175,000 sq. ft. Target, plus 190,000 sq. ft. of additional retail space, all on 41 acres near the desirable neighborhood of University Terrace.

"University Place will also be home to the first Bed, Bath & Beyond and the first Best Buy stores in Shreveport," says Bender. Additional retailers include T.J. Maxx, Rack Room Shoes, Dress Barn and Eyemart Express.

Persistence is paying off for Shreveport. And for the growing city of Aurora, Ill., where the executive director of the economic development commission, Sherman Jenkins, has been involved in a marketing campaign.

"We have pursued an image campaign using print and broadcast media, telling people that Aurora is a great place to work and play," Jenkins says.

The payoff was heralded by the opening earlier this year of the city's first Home Depot. A 194,000 sq. ft. Meijer is under construction adjacent to it on the Orchard Road retail corridor, and a Hampton Inn & Suites is being built.

"We have a redevelopment project under way in our downtown area that eventually will include an arena and a convention center," Jenkins says.

New housing starts, the ongoing creation of new jobs and increased retail sales are attracting the attention of developers to Illinois' third largest city, about 40 miles outside Chicago.

Jenkins says Chelsea Property Groups of Roseland, N.J., plans to build a new 430,000 sq. ft. upscale, fashion-oriented manufacturers' outlet center on Aurora's Farnsworth corridor with some 100 stores. Scheduled to open in 2002, the outlet center will create about 800 jobs and more than $2.5 million in sales tax revenue for the city of Aurora, says Jenkins.

Farnsworth features excellent access, with a full interchange and visibility from the East-West Tollway (Interstate 88), he says.

"We have a population now of 140,000," Jenkins says. "If we continue our rate of growth, by 2010 we will be the second largest city in Illinois.

"Our image campaign, ‘Aurora … the more you look, the brighter it gets,’ and our efforts to market the city are working."